Luzhou Laojiao Company Limited reported first-half 2026 revenue of 10.472 billion yuan, down 36.35% year-on-year, with net profit attributable to shareholders of 4.339 billion yuan, a decline of 43.37%. Breaking down the quarterly figures, the company's Q2 2026 revenue came in at just 2.447 billion yuan, plunging 65.54% year-on-year, while net profit attributable to shareholders fell to 631 million yuan—a steep 79.45% drop annually and a staggering 82% decline quarter-on-quarter from Q1's 3.708 billion yuan. During the same period, the broader industry saw profits slip only 17.7%, meaning Luzhou Laojiao's decline was 2.5 times the sector average.
More concerning, the company slashed mid-to-high-end liquor production by nearly 80%, yet sales volume only fell 40%, while ending inventory actually rose 8.6%—a clear signal that real terminal sell-through is far weaker than what the reported sales figures suggest. Meanwhile, the Q2 2026 sales expense ratio surged to 26.25%, directly pressuring profitability, as the net margin collapsed from 46.2% in Q1 to 25.8%.
In July this year, Luzhou Laojiao unusually created a new vice chairman position, with General Manager Lin Feng assuming the role, forming a dual "General Manager + Vice Chairman" structure. Lin, a marketing veteran who rose through the sales ranks, now faces the challenge of addressing the company's heavy reliance on its largest and top-five customers—a question that remains unanswered. In the first half of 2026, operating cash flow tumbled 65.68% year-on-year, with Q2 alone seeing a net outflow of 2.46 billion yuan, swinging to a loss. The company's net cash increase turned negative, forcing management to urgently raise 3.002 billion yuan in short-term borrowings by end-June 2026, compared to zero at the end of 2025.
Additionally, Luzhou Laojiao lost 162 domestic distributors in the first half of 2026, with contract liabilities down 27.6% from the start of the year. Customer concentration remains extremely high: the top five customers account for 61.53% of total sales, with the largest single customer taking 38.5%. Revenue from the top three customers fell 50%, 55%, and 18% respectively in the first half, indicating that major distributors' own inventory destocking pressures have now cascaded back to the company. At the same time, Luzhou Laojiao has pledged dividends of no less than 8.5 billion yuan for fiscal 2026. With first-half net profit of just 4.339 billion yuan, the company needs to earn at least 4.161 billion yuan in the second half to meet the target—but Q2 alone delivered only 631 million yuan. Several brokerages have already cut full-year earnings forecasts to between 6.3 billion and 8.3 billion yuan, putting the dividend commitment under severe strain.
Q2 Net Profit Drops to 600 Million Yuan While Inventories Keep Rising
On the evening of August 25, Luzhou Laojiao released its 2026 half-year report: revenue of 10.472 billion yuan, down 36.35%; net profit attributable to shareholders of 4.339 billion yuan, down 43.37%; and operating cash flow of 2.082 billion yuan, down 65.68%. The quarterly breakdown reveals Q2 revenue of 2.447 billion yuan, down 65.54%, and net profit of 631 million yuan, down 79.45%. After earning 3.708 billion yuan in Q1, the company managed only 631 million yuan in Q2—an 82% sequential collapse. In the first half of 2026, the domestic manufacturing profits for alcohol, beverages, and refined tea fell 17.7% year-on-year. The industry is indeed in a downturn, but Luzhou Laojiao's 43% decline is 2.5 times the sector average—a gap that industry headwinds alone cannot explain.
On the production side, mid-to-high-end liquor output in the first half plunged 77.40% to 4,801.19 tons. The company attributed this to "proactively controlling production pace based on sales demand and inventory levels." In plain terms: warehouses are overflowing, forcing production cuts. What's more troubling is that despite slashing output by three-quarters, sales volume only dropped 42.53%, while ending inventory grew 8.6% year-on-year. With production down sharply, sales declining, and inventories still climbing, real terminal demand is clearly weaker than the reported sales figures suggest. The company acknowledged this frankly in its filing: "The year-on-year decline in production volume is due to proactive control of production pace based on sales demand and inventory; the decline in sales volume is mainly due to continued industry pressure and falling product sell-through."
The expense side tells an even clearer story. Q2 2026 sales expense ratio skyrocketed to 26.25%, up 15.67 percentage points year-on-year. While revenue shrank by two-thirds, absolute sales expenses did not fall proportionally. Distributor rebates, terminal promotions, and price stabilization efforts all require spending—creating a vicious cycle where harder-to-sell products demand more channel investment, which in turn erodes margins. Net margin collapsed from 46.2% in Q1 to 25.8% in Q2. This is what industry insiders call the "triple kill" of volume, price, and profit: shrinking output, declining prices, and compressed margins amid the baijiu sector's deep cyclical and structural adjustment.
In July, Luzhou Laojiao made the rare move of establishing a vice chairman position, appointing General Manager Lin Feng to the role. The company hasn't had a vice chairman in a very long time—so what signal does this unusual personnel arrangement send? Public records show Lin, born in 1973 with a master's degree, is a core management figure who rose through the company's ranks, having served as deputy general manager, general manager, and marketing director of the sales company. He became general manager in June 2015, partnering with Chairman Liu Miao, who took office around the same time—a collaboration spanning over a decade. Both their terms run until June 27, 2027, when Liu will be 58 and Lin 54. Known for bold and pragmatic reforms, Lin has driven comprehensive changes in channels, organization, and consumer operations, helping Luzhou Laojiao return to 10 billion yuan in revenue in 2017 and surpass 25 billion yuan by 2022. His election as the company's first-ever vice chairman in July 2026, creating the dual role structure, comes amid the baijiu industry's profound structural transformation—highlighting the company's major personnel adjustment to secure market stability. As a marketing expert grown from the sales frontline, how Lin will tackle the persistently high concentration of the largest and top-five customers remains uncertain, and any reform in the current climate is fraught with variables.
Operating Cash Flow Down 65.68% with 40% of Sales Tied to a Single Customer
Amid the industry's deep adjustment and the company's own "volume control and price support" strategy, Luzhou Laojiao's cash flow position is under severe strain. For full-year 2025, operating cash flow netted 7.123 billion yuan, down 62.86% year-on-year. The pressure intensified in 2026: Q1 operating cash flow rose 37.3% to 4.54 billion yuan, but Q2 reversed sharply to a net outflow of 2.46 billion yuan, down 189.3% year-on-year. As a result, first-half 2026 operating cash flow was just 2.082 billion yuan, down 65.68%, with net cash and cash equivalents decreasing by 1.236 billion yuan versus a positive 1.786 billion yuan in the same period last year. The direct causes are reduced cash receipts from sales and lower bill discounting. More fundamentally, this stems from the company's deliberate "volume control and price support" approach: Guojiao 1573 has held firm on pricing despite competitors cutting prices to boost volume, leading to a 17.03% drop in liquor sales volume in 2025. Meanwhile, the company relaxed payment collection requirements, avoided pressuring channel payments, and settled channel expenses, adding to rigid expenditures and exacerbating short-term cash flow pressure.
To bridge the gap, the company ramped up financing: short-term borrowings jumped to 3.002 billion yuan by end-June 2026, compared with zero at end-2025. More alarmingly, distributor numbers are shrinking and contract liabilities are falling. In the first half, domestic distributors decreased by 162, while contract liabilities dropped 27.6% from 3.367 billion yuan at the start of the year to 2.437 billion yuan. Distributors are unwilling to prepay—162 have even walked away entirely. The half-year report shows the top five customers accounted for 61.53% of total sales, with the largest single customer alone taking 38.50%. For a national liquor company that once exceeded 30 billion yuan in annual revenue, nearly 40% of sales resting on one customer is a precarious position. The trend is even more worrying: in full-year 2025, the top five customers made up 74.71% of sales, with the largest at 48.92%. While concentration has eased slightly in the first half of this year, it remains at extremely elevated levels. Such concentration means deep dependence on a few major distributors—if these giants face their own cash crunches or slow sell-through, the company's revenue takes a direct hit. Indeed, revenue from the top three customers fell 50%, 55%, and 18% respectively in the first half, showing that major distributors are themselves destocking and have little appetite for new orders. While Moutai has been actively optimizing its distributor network and diversifying channel risk in recent years, Luzhou Laojiao's concentration problem appears to persist.
The company has chosen a difficult path: controlling volume to support prices. Guojiao 1573's wholesale price has held around 825 yuan per bottle, down just 15 yuan from the start of the year. In the same price band, Wuliangye chose a different route—cutting prices to maintain volume, with its eighth-generation product's wholesale price briefly dipping below 800 yuan. Neither strategy is inherently right or wrong; they're just different choices. Luzhou Laojiao has defended its price band, but the cost was 4.7 billion yuan in lost Q2 revenue.
There's also the unavoidable issue of the 8.5 billion yuan dividend. Under its "2024-2026 Shareholder Dividend Return Plan," Luzhou Laojiao committed to total cash dividends of no less than 8.5 billion yuan for fiscal 2026. With first-half net profit of just 4.339 billion yuan, the company needs to earn at least 4.161 billion yuan in the second half just to cover the minimum dividend. But Q2 alone delivered only 631 million yuan—if this earnings level persists, full-year profit will fall far short of covering the dividend commitment. If profitability doesn't recover significantly in the second half, the pledge faces immense pressure. Either the company dips into historical retained earnings, depleting its financial buffer, or it adjusts the dividend plan, undermining market confidence—neither path is appealing. Several brokerages have already slashed forecasts: Ping An Securities cut its 2026 net profit estimate from 10.1 billion to 8.3 billion yuan, while Sinolink Securities is more bearish at 6.38 billion yuan. If full-year profit lands around 8 billion yuan, an 8.5 billion yuan dividend would essentially consume all earnings. While the company has cash on hand, whether such payout intensity is sustainable is another question entirely. At its core, Luzhou Laojiao's proactive channel destocking, production cuts, and willingness to sacrifice short-term revenue to protect its price system are directionally correct—but the pain is proving more severe than expected.
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